In recent years, the EU has seemingly waged a war against multinational corporations, which have been accused of undercutting local businesses. The latest strategy implemented by the EU sees businesses bound by revised VAT rules. Although this scheme is set to prevent multinationals further damaging European business, the reality is that smaller digital firms have found themselves suffering instead.

The VAT update – which has already seen widespread negativity across the continent – states that all digital businesses are required to pay VAT in the country where their service is delivered, rather than where it was created; for example, a UK software developer selling their product or service in France will have to charge the French VAT rate. The implication, of course, is that smaller digital businesses often work across the internet – and therefore, across the boundaries of countries. On top of this is the large-scale amount of administration required for each sale, with tiny companies having to close their digital doors due to a lack of time.

The unpopular move has unsurprisingly met with opposition, including from the lobby group EUVATACTION, who are campaigning on behalf of the ‘tens of thousands’ of businesses suffering.

Closer to home, Catherine Bearder – an MEP for the south east of England – has brought her own appeal to the European commission; she believes that enough pressure could see the rules relaxed fairly soon. Should a proposed single, minimum threshold across the EU be implemented, an estimated 250,000 smaller digital suppliers would be exempt from the rule – saving thousands of jobs.

The IPSE (Association of Independent Professionals and the Self-Employed) also criticised the VAT ruling, suggesting that not enough research was conducted into this new branch of the digital marketplace. Reflecting on the report – which suggests HMRC prepared for only 5,000 firms being affected – implementation of the rules was deemed “poorly thought through.”

For the time being, small digital businesses across the continent wait with bated breath to find out if they will be one of the lucky few exempt from the ruling. If you need help with your finances, then Gorilla has accountants for digital creative professionals to help.

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